The covid-19 pandemic was not great news for the retail office spaces in 2020 and the ending months of 2019. The retail apocalypse was a primary concern before the covid-19 outbreak took place and only worsened after the pandemic. It was estimated that approximately 9,500 stores went out of business in 2019, according to the Coresight research.
Thus, 2020 was terrible for those who invested in retail spaces as most of the population never visited these, as they were forced to work from home due to the social distancing and stay-at-home norms.
This rapid downfall in the retail spaces has led many real estate investors who would usually be inclined towards retail spaces to shift the focus to the next thing in the market: warehouses.
According to the real estate experts, warehouses and distribution centers will be the next big thing and anyone who wants to strike the iron.
At the same time, it’s hot should start investing in warehouses or distribution centers, which will see a considerable rise not only in the year 2021 but also shortly.
Here’s why Warehouses Could be a Next Big Thing
Many retailers who struggled before the pandemic are now trying to shift from physical stores to their online stores. While the major part of the population has entirely made a shift towards online shopping – it does not make sense for business houses to think of selling from their physical outlets.
They know that they have to shift to an online platform sooner or later. That makes a lot of financial sense. It’s also more cost-effective to fulfill and ship online orders instead of bearing the expenses associated with physical outlets, including electricity bills, rent, insurance, and employee wages.
The year 2020 was when many small businesses shifted to having online storefronts and bidding goodbye to their physical outlets. This trend is here to stay and is going to see a spike in the year 2021.
Thus, if one thing is clear from 2020 – then it is that most of the businesses will have online stores in place, and therefore, the warehouses could be the next big thing as these online stores will need a storage and distribution facility.
The rapidly evolving and massively increasing shift to e-commerce is very favorable to spark and hike in warehouse demand. Now that is something that commercial real estate investors should line up to capitalize upon, especially given that shopping malls will become online in the precarious future.
Thus, 2021 will be a year where most of the investors are going to start investing in warehousing and distribution centers.
The investors who have retail spaces are trying to flip these properties into storage or warehousing facilities to meet the increasing demand for such facilities. Another set of investors wants to get their money in industrial areas, which will typically require warehouses as part of their portfolios.
Thus, if you are thinking of investing in warehousing and distribution centers, you can rest assured that it will be a safe bet for you in the year 2021 and soon. Read on to discover some of the upsides of investing in warehouses.
Advantages of Investing in Warehouses
First, the most significant upside of investing in warehouses in the year 2021 is that most of the business houses that have shifted to an online storefront will need warehouses to store their inventory. Thus there is going to be a massive demand for such warehousing or even distribution centers.
Warehouses also tend to be relatively low maintenance properties where the focus is on storage and efficiency more than anything. Thus, commercial real estate investors who want to invest in warehouses can no longer have to spend unnecessarily on the aesthetics or interior design of the properties.
They just need to focus on the functionality of the space and design their warehouses in such a way as to accommodate most storage space. Another upside of investing in warehouses is that warehouse tenants are more inclined to sign longer-term leases soon.
This trend is opposed to the trend of retailers where they may choose to lock themselves into multi-year arrangements as they have lots of uncertainty about the returns they might get.
Renting out your properties to retail owners is a dangerous option as most retailers are likely to default on their rent payments because of the primary reason that their business is down.
Adding to this is that E-Commerce giants like Amazon will likely seek to acquire more warehousing spaces than ever to win the dropshipping race and expand their Monopoly and E-Commerce empires. Thus, if you are thinking about investing in warehouses – this is the best time.
Different ways to Invest in the Warehouses sector
There are three primary ways of investing in the booming warehouse sector. Depending on your financial situation and your risk appetite – you may choose to enter into the warehousing sector through one of the three ways mentioned below:
Direct warehouses investment – Direct warehouses investment is for those investors who are very confident about their warehousing investment and who can directly buy warehouse properties and rent them out to different business houses.
This is the sector where most commercial real estate investors have put their money in and are waiting to reap its returns.
Flipping existing retail spaces into warehouse facilities – For commercial real estate investors who have invested in retail spaces and are suffering from the defaulting retail tenants might consider flipping these non-performing retail spaces into warehousing facilities at low cost and start reaping benefits of the same.
Various loan options like commercial bridge loans might be the best financing options for those looking to flip their retail spaces into warehousing facilities at low costs.
Investing in warehousing facilities through REITs – If you do not have the time to look into your warehousing investment facility all by yourself, the next best option to enter into the warehousing sector is to invest through REITs that in turn invests in warehousing facilities.
This is safe for those who don’t have the luxury of time to do all the homework by themselves but want to put their money to work by indirectly investing in warehouses with REITs’ help.
Final Words
For all the reasons mentioned above, warehouse investing is a good bet right now, and you can rest assured that it will continue to be a solid move not just in 2021 but in future years.
If you do not have warehouses in your commercial real estate portfolio, right now might be the best time for you to consider shifting some assets around to make room for warehouse investing, which is the big thing right now, and in the coming years too.
